Defence officials struggling with details of Liberal tax-break promise

OTTAWA — National Defence has been struggling to make good on one of the Trudeau government’s recent promises: giving tax breaks to military personnel and police officers deployed on certain overseas operations.

Defence Minister Harjit Sajjan announced the measure during a major speech at the Royal Military College in Kingston, Ont., in May as part of the Liberals’ new defence policy.

While Sajjan billed the move as an attempt to recognize the sacrifices that are often made by military personnel and their families, it also addressed what had been a prickly issue for the minister.

Some service members based in Kuwait had become increasingly vocal in the weeks leading up the announcement about a policy change that threatened to strip their tax-exempt status.

Yet the devil has proven to be in the details, with officials now scratching their heads over what types of operations and deployments should and should not be eligible for tax relief.

The debate is particularly relevant for the navy’s sailors, many of whom on close reading of the defence policy would not be eligible for tax relief despite spending up to six months at sea at any given time.

Sources tell The Canadian Press that the military’s senior leadership is now seized with the issue, and that defence chief Gen. Jonathan Vance has told officials he wants the issue resolved by mid-August.

Alan Okros, an expert on the management of military personnel at the Canadian Forces College, said officials are now caught trying to make good on the Liberals’ promise without making matters worse.

“They’re trying to find a solution here that will achieve what the government intended,” Okros said.

“But they don’t want to start creating precedents that would generate lawsuits or people making claims of ‘Well, if that applied there, it applies here.’”

The tax measure would see the salaries of military personnel and police officers sent on certain operations exempted from federal income tax for the duration of their deployments.

The move, retroactive to Jan. 1, 2017, exempts eligible salaries up to the pay level of lieutenant-colonel and is expected to cost the federal treasury about $85-million over the next five years.

Personnel would still be eligible for extra hardship and risk pay if deployed into dangerous environments.

Both Sajjan and the Liberals’ defence policy, which was released a few weeks after the minister’s speech at RMC, said the exemption would be given to members deployed on what are called “named operations.”

Named operations are usually the largest and most complex, such as Operation Impact, which is Canada’s mission against the Islamic State group, and Operation Unifier, the military’s training mission in Ukraine.

The service members complaining in Kuwait were attached to Operation Impact, and thus would be eligible for the tax benefit.

But many military personnel deployed overseas for extended periods are never attached to a named operation, or may only spend a portion of their time in such a situation.

That is particularly true of the navy, which has had two frigates sailing around the Asia-Pacific region since March, but whose sailors are not technically on a named operation.

Officials are now backing off the explicit reference to named operations, though no decision has been made on what criteria will trigger tax relief for deployed personnel.

“The Canadian Armed Forces is currently working on a framework aimed at implementing the proposed amendment to the Income Tax Act,” said National Defence spokeswoman Kim Lemaire.

“It doesn’t say specifically ‘named operations’ because there may be others that, as determined by the chief of defence staff, this tax relief will be applied to. That’s still in the works right now.”

Okros said the Liberals have been trying to contrast their treatment of Canada’s military personnel with that of the Harper government, which was seen as being “stingy” with benefits for service members.

“Under Trudeau, they are trying to send a different message of ‘We actually do support the troops,’” Okros said.

“So I think there’s a bit of that in terms of a political agenda. But then how do you do this in the right way so that it doesn’t create more problems than it solves?”

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